The following discussion should be read in conjunction with our
consolidated financial statements and notes thereto included
elsewhere in this Annual Report on Form 10-K. Forward-looking
statements are statements not based on historical information
and which relate to future operations, strategies, financial
results or other developments. Forward-looking statements are
based upon estimates, forecasts, and assumptions that are
inherently subject to significant business, economic and
competitive uncertainties and contingencies, many of which are
beyond our control and many of which, with respect to future
business decisions, are subject to change. These uncertainties
and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any
forward-looking statements made by us, or on our behalf. We
disclaim any obligation to update forward-looking statements.
Overview
We were incorporated in the State of Nevada under the name ?UA
Granite Corporation? on February 14, 2013. Our Articles of
Incorporation initially authorized us to issue up to 75,000,000
shares of common stock, par value $0.00001 per share. On April
30, 2018, upon approval by our Board of Directors and majority
stockholders on April 27, 2018, we filed Amended and Restated
Articles of Incorporation with the Nevada Secretary of State,
with a delayed effective date of May 15, 2018, increasing the
number of authorized shares of common stock from 75,000,000
shares to 200,000,000 shares. In connection with the amendment
and restatement of our Articles of Incorporation, our Board of
Directors and majority stockholders also approved and adopted
the Amended and Restated Bylaws of the Company on April 27,
2018. Effective May 31, 2018, pursuant to our Amended and
Restated Articles of Incorporation and upon completion of
processing by the Financial Industry Regulatory Authority
(?FINRA?), we changed the name of our Company from ?UA Granite
Corporation? to ?Vortex Blockchain Technologies Inc.? in
anticipation of a change of our business plan and direction.
Also effective May 31, 2018, we effected a 15-for-1 forward
stock split of all our issued and outstanding common stock,
which increased the number of issued and outstanding shares of
common stock from 1,400,000 to 21,000,000.
We are a development-stage company with limited current
revenues, approximately half a million dollars in assets, and we
have incurred losses since inception. Our limited start-up
operations have consisted of the formation of our Company,
development of our business plan, efforts to raise capital and
maintaining our public company reporting requirements. In
October of 2018 we completed a reverse merger with Vortex
Network LLC and are now operating as a cryptocurrency holding
company engaged in the business of mining crypto assets. In
addition to its mining operation, Vortex Network was developing
a variety of applications in the cryptocurrency space, in both
the software and hardware spheres, including cloud mining,
blockchain hardware and software development, and a
cryptocurrency wallet and exchange.
Share Exchange Agreement
On October 17, 2018, the Registrant entered into a Share
Exchange Agreement (the ?Exchange Agreement?) with Vortex
Network and the Selling Members. Pursuant to the terms and
conditions of the Exchange Agreement, the Selling Members agreed
to voluntarily exchange all of the outstanding membership
interests of Vortex for 65,000,000 shares of common stock of the
Registrant. The Exchange Agreement was approved by the boards of
directors or managers of each of the Registrant and Vortex, and
by the Selling Members.
The Exchange Agreement includes customary representations,
warranties and covenants of the Registrant, Vortex and the
Selling Members made to each other as of specific dates. The
assertions embodied in those representations and warranties were
made solely for purposes of the Exchange Agreement and are not
intended to provide factual, business, or financial information
about the Registrant, Vortex and the Selling Members. Moreover,
some of those representations and warranties (i) may not be
accurate or complete as of any specified date, (ii) may be
subject to a contractual standard of materiality different from
those generally applicable to stockholders or different from
what a stockholder might view as material, (iii) may have been
used for purposes of allocating risk among the Registrant,
Vortex and the Selling Members, rather than establishing matters
as facts, or (iv) may have been qualified by certain disclosures
not reflected in the Exchange Agreement that were made to the
other party in connection with the negotiation of the Exchange
Agreement and generally were solely for the benefit of the
parties to that agreement. The Exchange Agreement should not be
read alone, but should instead be read in conjunction with the
other information regarding the Registrant and Vortex that has
been, is or will be contained in, or incorporated by reference
into, the Forms 10-K, Forms 10-Q, Forms 8-K, proxy statements
and other documents that the Registrant files with the
Securities and Exchange Commission (the ?SEC?).
The Exchange Agreement provides for the resignation of Angel
Luis Reynoso Vasquez from all positions as an officer and
director of the Registrant, and the appointment of new officers
and directors, effective as of the closing of the Exchange
Transaction (the ?Closing?).
Results of Operations
During the year ended March 31, 2019, we focused on internal
development of our hardware and software plans, limited bitcoin
mining, and satisfying our ongoing obligations as a public
reporting company.
From February 14, 2013 (the date of our inception) to March 31,
2019, we have earned only limited revenues. We expect to
continue to incur losses over the next twelve months, or until
we are able to fully develop and carry out our new business
opportunity that enables us to generate revenues.
Comparison of Year Ended March 31, 2019 and March 31, 2018
Our operations for the year ended March 31, 2019 and March 31,
2018 can be summarized as follows:
Year Ending
March 31, 2019
Year Ending
March 31, 2018
Revenue
$
87,568
$
-
Operating Expenses
848,595
196,493
Interest Expense
-
-
Net loss
$
(761,027)
$
(196,493)
During the year ended March 31, 2019, we incurred $848,595 in
operating expenses, compared to $196,493 in operating expenses
during the year ended March 31, 2018. The increase in operating
expenses can be attributed to an increase in legal and
accounting expenses related to merger and assuming the
operations of Vortex Network and their existing staff.
We incurred a net loss of $761,027 for the year ended March 31,
2019, compared to a net loss of $196,493 for the year ended
March 31, 2018. The increase in net loss over the comparable
years ended March 31, 2019 and 2018 can be attributed to an
increase in operating expenses without generating sufficient
revenues to offset those expenses.
Liquidity and Capital Resources
Balance Sheets
As of March 31, 2019, we had $41,708 in cash and total assets of
$617,890. As of March 31, 2018, we had $308,387 in cash and
total assets of $1,502,234. The assets are primarily
infrastructure and bitcoin mining equipment.
As of March 31, 2019, we had total liabilities in the amount of
$659,728, compared to total liabilities in the amount of
$824,194 as of March 31, 2018. The decrease in our total
liabilities and increase in our working capital deficit is due
to an increase in accounts payable and accrued liabilities and
amounts due to our director, as we had limited cash flows to
repay outstanding obligations as they became due.
As of March 31, 2019, our accumulated deficit was $1,085,355
compared to an accumulated deficit of $72,977 as of March 31,
2018. The change is attributed to assets held by the merger
company Vortex Network, LLC which are now entirely part of the
Company Vortex Blockchain Technologies, Inc.
Cash Flows
Cash Used in Operating Activities
During the year ended March 31, 2019, we used $432,447 in cash
for operating activities, compared to $710,188 in cash provided
for operating activities during the year ended March 31, 2018.
The increase in the amount of cash used for operating activities
relates primarily from the acquisition of assets in the merger.
We cannot compare these to the previous shell company?s 2017 YE
as they are now meaningless.
Cash Used in Investing Activities
During the period from February 14, 2013 (inception) to March
31, 2019, the Company has not engaged in any investing
activities. We expect to use cash for investing activities in
future periods, when available.
Cash Flows from Financing Activities
During the year ended March 31, 2019, we received $292,500 in
cash from financing activities, compared to $751,017 in cash
received from financing activities during the year ended March
31, 2018. The proceeds received from financing activities during
the year ended March 31, 2019 and March 31, 2018 were advances
provided by management to support our day-to-day activities and
assets acquired from Vortex Network in the merger.
Recent Developments and Future Financing Activities
In order to execute on our business strategy, we will require
additional working capital. We anticipate that we will require a
minimum of approximately $2,500,000 in debt and/or equity
financing to proceed with our plan of operations over the next
twelve months. As we had negative cash and working capital in
the amount of $ 602,281 as of March 31, 2019, we do not have
sufficient working capital to enable us to carry out our
operations for the next twelve months.
We expect to use debt and/or equity financing to fund operations
for the foreseeable future, including, without limitation, the
sale of at least $2,500,000 of our capital stock pursuant to a
private placement for the purpose of financing the contemplated
ongoing operations of the Company and Vortex, as previously
disclosed on our Current Report on Form 8-K filed with the SEC
on October 22, 2018.
Any future sale of additional equity and/or debt securities will
result in dilution to current stockholders. We may also seek
additional loans where the incurrence of indebtedness would
result in increased debt service obligations and could require
us to agree to operating and financial covenants that would
restrict our operations. Financing may not be available in
amounts or on terms acceptable to us, if at all. Any failure by
us to raise additional funds on terms favorable to us, or at
all, could limit our ability to expand business operations and
could harm our overall business prospects.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have,
or are reasonably likely to have, a current or future effect on
our financial condition, changes in our financial condition,
revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to our
stockholders and investors.
Critical Accounting Policies
Our financial statements are affected by the accounting policies
used and the estimates and assumptions made by management during
their preparation. A complete listing of these policies is
included in Note 2 of the notes to our financial statements for
the year ended March 31, 2019. We believe the accounting
policies utilized in preparing our financial statements conform
to the generally accepted accounting principles in the United
States (?US GAAP?).
The preparation of financial statements in conformity with US
GAAP requires management to make estimates and assumptions that
affect the amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the balance
sheet and reported amounts of revenues and expenses during the
reporting period. We base our estimates and assumptions on
current facts, historical experience and various other factors
that we believe to be reasonable under the circumstances, the
results of which form the basis for making judgments about the
carrying values of assets and liabilities and the accrual of
costs and expenses that are not readily apparent from other
sources.
By their nature, these estimates are subject to an inherent
degree of uncertainty, and actual results could differ from such
estimates. The actual results experienced by our Company may
differ materially and adversely from our Company?s estimates. To
the extent there are material differences between the estimates
and the actual results, future results of operations will be
affected.
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